Why trading jobs are boring. Why senior staff are worth it

When Brian Moynihan presented at the Barclays Global Financial Conference yesterday, he didn't just say that fixed income trading revenues are down and equities trading revenues are "up strongly" in the third quarter. Moynihan's presentation also touched upon how trading jobs have changed and why banks pay big money for senior staff.

There's a lot less risk-taking than there used to be

Exhibit number one is the chart below. It suggests that Value at Risk (VaR) across BofA has fallen nearly 80% in the past six years. Ok, this isn't just trading VaR and VaR isn't infallible as a risk measure, but a drop of this magnitude reflects the generational shift away from risk taking and market making towards a type of trading that's a lot more agency-based and amounts to little more than matching buyers with sellers. Trading is more boring than it used to be as a result.

Experienced staff are 30%+ more productive than the rest

Exhibit number two suggests that banks are entirely justified in paying more money to their experienced people.

Also taken from Moynihan's presentation, the chart below underscores the extra revenues generated by people who know what they're doing. Admittedly, it refers to financial advisors rather than to corporate finance professionals or credit salespeople, but we'd guess the same principal applies.

Given that the 'all advisors' line includes juniors and seniors it's not possible to work out the exact difference in productivity between the groups. As it stands, the differential doesn't justify paying senior staff many multiples of juniors' pay, but it looks more than reasonable to give them a bump of 60% or so above trainees.